NFT
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5
minute read

Why NFT Projects Need Utility

By

Jay G. Perlman

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At the time of writing this, Twitter is flooded with news about ETH hitting 1K, sob stories of investors losing their life savings from sweeping the floor on the wrong PFP collection, and other posts that feed directly into the collective doom scrolling.

September 8, 2022

It’s true that the NFT market – and the economy in general – is not quite the WGMI !vibes that many were feeling six months ago.

Despite the string of crypto dips and obnoxious abundance of 1 ETH = 1 ETH memes, plenty of collectors and creators are bullish on a specific type of project: NFT collections with utility.

What does NFT utility even mean?

Many NFT collectors, traders, and artists are into NFTs simply for the art. Others who ape into a project want something a little more than a jpeg to replace their Twitter PFP.

That’s where NFT utility comes in.

In basic terms, the utility of an NFT generally means what comes with the token you purchase. Think of it as perks and benefits only members can unlock through their token ownership.

There are plenty of concrete examples of how founders infuse utility into their NFTs. Take World of Women, for example: dropping a few ETH for one of these tokens not only bags you a blue-chip NFT but also gives owners access to holders-only raffles, curated pre-sale and mint passes for high potential collections, and even an invite to the annual gala for holders and IRL events like a dance party with Madonna - aka The Queen of Pop – at NFT NYC 2022. These utilities, plus plenty of other FOMO-inducing perks that non-holders can only speculate about, are partly what makes this collection so desirable.

Of course, utility is not the same across the board. While IP licensing, exclusive merch, and member-only IRL events are standard perks that founders will shower their community with, there’s more to utility than just token-gating cool things.

Take Loser Club, for instance.

Never cool. Never alone.” is not only the tagline of this project but also its ethos of the Loser Club culture. This simple but powerful tagline means that the utility of holding a Loser Club NFT is the access and unwavering support of one of the fastest-growing communities.

This type of collective utility opens the doors for artists and creatives to have a strong base for promoting their work, plus building and collaborating on projects that add value to the community. It’s a hub of creativity and support that, in a way, is like an artistic DAO, and the utility is the strength of the network.

But while many projects have seen success purely because of the utility passed onto holders, there are still plenty of creative uses of utility waiting to be discovered and deployed into the metaverse.

Do all NFT projects need utility?

The short answer to this is, of course not! Just look at Goblintown.wtf!

The longer answer is that it’s complicated but something worth considering if you’re looking to build a project with longevity. Betty – the Horde Mother of Deadfellaz – has some solid tweets that sum the nuances between different collections:

Betty is unequivocally correct when she says that not all projects have the same purpose, and each has a unique audience to serve. So for art projects that don’t have fringe benefits baked into their roadmap, this does not make them destined to fail.

While an NFT project doesn’t need to be utility-focused, there’s still plenty of reason to believe that projects that come with utilities will be the ones that last for the long term.

Another reputable source from the NFT space, azf.eth, broke down the importance in a 27-tweet-long thread:

Especially with the current bear market of 2022, NFT enthusiasts are starting to ask more questions about the actual value of their once very expensive JPEGs. Projects with strong communities and foundational principles built on giving back to the owner are becoming more desirable investments.

What does this mean for the NFT space?

There’s much to be excited about with this potential shift towards more utility-focused projects. For one, it opens the door to an even more creative crossover between the metaverse and the physical world.

An excellent example of this could be concerts or promotional groups using NFTs as an entrance to the show that eliminates the possibility of fake tickets and creates a community with a shared interest. Of course, this is just another single example amongst many options.

NFT holder's-only tickets

It’s not just brands that see the massive potential behind utility-based NFTs. At the moment of writing this, the country of Romania (yes… ROMANIA) is exploring how to incorporate NFTs to cut back on bureaucratic red tape for its citizens.

According to a report by ICI Bucharest (the National Institute for Research & Development), “ICI Bucharest and Elrond Network are laying the foundations for digital asset trading (NFT) platform for institutions and modernizing the classic DNS and TLD system.” This means that citizens can use NFTs and Web3 technology to store, transfer, and access official government documents like passports and birth certificates.

Another hopeful change that will come with an emphasis on utility is it may solve the issue of investors looking for immediate liquidity and immediate gains. Because while crypto and NFTs will always attract those looking to get rich fast, utility promotes longer-term ownership over quick flips.

Who knows? While this is still just speculation, it could bring an element of stability that crypto and NFTs have been missing since they busted onto the scene. Most of this will rely on the ingenuity of creators and teams to figure out what their target audience really needs (apart from stacking ETH), as well as what they want.

So how do I add utility to my projects?

There’s no definitive playbook for filling your NFT projects with desirable utility. There are, however, the typical benefits that are more or less easy to implement (merchandise, discounts, exclusive events, etc.) While there are no guaranteed ways of adding utility, there are some awesome tools that creators can use to facilitate utility into NFT projects.  Still, it’ll always be the NFT owners and community who decide whether the utility is, in fact, useful.

Once again, this comes down to founders and creators doing the necessary analysis and background work to determine how their NFTs can provide genuine utility to the community they seek to serve.

None of this is easy, and #DYOR is something you should live by when developing utility. But when you combine quality art and a genuine desire to give something back to holders, there’s always the chance that you can create a utility-based collection that changes the NFT space.

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The Author

Jay G. Perlman

Jay G. Perlman

Content and copywriting for Bueno.

Just a Californian living a laid-back life in Spain. Love poodles, punchy copy, and all things NFTs. Always on the lookout for the next big story in the metaverse.

Try and doxx me @Perlmanski

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